Most important financial indicators to invest in stocks
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| Financial indicators |
Financial indicators are considered one of the most important tools that are used in determining the decision to invest in any company, stock, or form of direct or indirect investment.
This article will explain the most important financial indicators and how to easily calculate any financial indicator? What is the benefit of financial indicators?
Gross Profit Margin Index
Gross Profit Margin % = Gross Profit (Income) / Sales (Revenue)
The benefit of the index lies in the fact that a decline in the index indicates a decline in profits due to an increase in costs, and a higher ratio indicates the company's ability to generate profits.
Net profit margin index
Net Profit Margin % = Net Profit (Income) / Sales (Revenue)
The benefit of the index lies in the fact that the index decreases by less than the sector average indicates that the selling prices of the company's products are low or the cost prices are high or both, and the rise in the index indicates the efficiency of the company's management in controlling sales.
EPS (Earnings per share) Index
Earnings per share % = net profit (income) / number of shares issued
The benefit of the index lies in the fact that the rise in the index is evidence of the company's ability to continue distributing profits.
Return on assets index
Return on Assets % = Net Profit (Income) / Total Assets (Assets)
The benefit of the index lies in the fact that the rise in the index indicates the efficiency of management in the use of assets and is the true measure of the company's profitability.
Return on equity index
ROE % = Net Profit (Income) / Equity (Equity)
When shareholders' equity is extracted from the financial statements, non-controlling interests must be excluded.
The benefit of the index lies in the fact that the rise in the index indicates the company's efficiency in using shareholders' equity.
Total Asset Turnover Index
Total Assets Turnover = Sales (Revenues) / Total Assets (Assets)
The benefit of the index lies in the fact that the index's decline from the sector average indicates that the company is not achieving sufficient sales commensurate with the volume of its investments.
Fixed Asset Turnover Index
Fixed Asset Turnover = Sales (Revenue) / Fixed Assets (Asset)
The benefit of the index lies in the fact that the index's drop below the sector average indicates a defect or insufficiency on the part of management in the use of its fixed assets.
Total Assets Equity Index
Total Assets Equity % = Total Assets (Assets) / Shareholders Equity (Equity)
The benefit of the indicator lies in the fact that this indicator indicates the extent to which the company relies on shareholders' equity in financing its assets.
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